 We had a few substitutions that happened. Unfortunately, last minute casualties. So Joanna Blakely got food poisoning and wasn't able to make it out today. With this, Alan Black as well fell ill the other day and could not travel. But we are going to kind of substitute in Misha, Angus for part of this, to address some of the things that Alan Black was going to talk about. And you're going to be in good hands with Stefan Kinsella in just a moment here. And he's going to really be able to, I think, set the record straight about a lot of the kind of confused thinking that surrounds this idea of intellectual property and tease apart what that term really means and how we might be better off by rethinking that in a pretty radical way. So if we can welcome him to the stage, let's get this underway. Thanks, Joseph. Very happy to be here. I'm a patent attorney. And I am also a libertarian and an adherent of the Austrian School of Economics. Good. So some people will understand some of the Austrian School of Economics is a radical free market school of economics that is not positivist in methodology like the Kossians and the Milton Friedman-type school of philosophy. And I'm bringing that up because there is a methodology of science, which I think is applicable to even the study of natural sciences and our topic today. So some of you may have heard of the land of cocaine. Not cocaine. This is California. But this is the land of milk and honey. The poets in the Middle Ages came up with this idea. It's a mythical land of infinite plenty where everyone has every once satisfied just for the asking. There's no scarcity whatsoever. But we do not live in the world of cocaine. In our world, there is scarcity. You can't just have what you want merely by wishing for it. In our world, there is no magic. This gives rise to two key features of the world, scarcity and causality. There are scarce resources in the world that can only be used by one person at a time. You can think of them as also rivalrous, as economists call it. And the second key feature of the world is that in order to achieve results in the world, we have to use these scarce things in the world as means of action. And the choice of the means and the way we use them has to comport with causal laws in order to be successful. In other words, you decide on an action. You choose a means, a scarce means, to achieve it. And you have to obey causality. You have to choose a causally efficacious means to achieve your end. So this gives rise to the observation that there are two twin pillars of human prosperity and civilization, and that is knowledge and property. And in a systematic way, knowledge is science. Science is the systematic acquisition and categorization of knowledge. So knowledge and property go hand in hand. And there are twin pillars of human prosperity. The reason is we have to have property rules to permit the peaceful and productive use of these scarce resources in the world. Otherwise, people would be fighting over them all the time. This is why we have property rules that assign an owner to every possible scarce resource. And science is necessary to provide a growing base of systematic knowledge of causal laws so that individual human actors know how to employ means to achieve ends. This is, by the way, part of the praxeological framework of Mises, the primary Austrian economist. Praxeology means the logic of action, the science of the study of human action. And he views action in this way that I just described. Employing means to achieve ends. And the means are scarce means in any event. So in a free and civilized society, which I hope I don't have to defend, property rights are respected. And individuals are free to learn and to draw from the existing body of human knowledge and to add to it as well. And so this is the libertarian or the free market version of a civilized society, a free society in which property rights permit men to use resources cooperatively and productively and peacefully without conflict. And where science informs men how to use these resources. And this knowledge of science expands our knowledge of how to use resources to achieve ends. And it also expands our vision of what ends are even possible. Now, science and learning in general, which is the acquisition of knowledge, has many forms. Common experience, just living, observation, being immersed in a culture, informal teaching by parents, imitation, formal education and instruction, even employment, working at a job, you learn things. And of course, by the scientific method and empirical testing. But learning is also part of the free and competitive market. Entrepreneurs invest in research and development and come up with innovations to bring desired products to market to make a profit. Consumers and competitors learn from these products. They learn what's possible. They learn how they're made. And then competitors emulate and they copy and they compete and sometimes improve on other innovations. Now, the problem is that patent and copyright short-circuit this process. And I did say I'm a patent lawyer, and I know patent lawyers are not appreciated very much in this area, and I don't blame you. But there's not a person in this room that hates patents more than I do. What patent and copyright are, shorn of their propagandistic intellectual property cover, are just grants by the state of monopoly privilege designed to protect certain people and companies from competition. Pure and simple, that's what it is. The holder of a patent or a copyright can use the state force against an innocent, peaceful competitor or person using information or that might compete with them. Basically, patent and copyright are based upon the confused notion that it is wrong to learn or to use information in some context. What it does is it tries to assign what's called property rights in information and patterns and designs. But remember, the very purpose of property is simply to address the problem of conflict over scarce resources. But ideas and knowledge can be used over and over and over, and they can accumulate in society. And they're not scarce. So when the law tries to impose scarcity on something that's not scarce, it tries to make ideas scarce when they're not scarce. Why does it do this? We have to have property because some things are scarce. But the free market is always trying to overcome this problem, right? Even though we have scarcity and limitations in the physical world, the free market tries to create abundance despite that. So the very purpose of the market is to overcome the scarcity that, unfortunately, does exist in the world. But more knowledge is good. The more knowledge we have, the better off we are. In fact, the accumulation of knowledge is fundamental and essential for societal progress. So we shouldn't try to make it scarce by treating it with property rules designed to treat things that are scarce. So this is basically the fundamental problem with intellectual property, primarily patent and copyright. Don't have time to address trademark trade secret, boat hold designs, the Semiconductor Massport Protection Act, and reputation rights and defamation law, which are also types of IP. But the fact is, it's actually literally impossible to have property rights in knowledge. So what the law ends up doing is it doesn't end around that. And it basically, under the guise of protecting property rights in knowledge, it gives property rights in other things that are scarce. So for example, if you have a copyright, that gives you the right to take some of my money if I perform a certain action. So really, the law transfers property rights in my money. Or in my printing press, it doesn't permit me to use my printing press as I see fit. If someone has a patent, it permits them to use the force of the state to extract money from someone in the form of damages or royalties or to use state force in the form of an injunction to tell them they cannot use their own property in a certain way under penalty of contempt of court and jail and fines. So IP, as I will argue, is antithetical to both science and property. As I said, it undercuts property rights by giving third parties a veto right, which is like a negative servitude in the law. It's a type of property right, over how to use their own property. Especially patents, which apply even to people who independently invent something. If I independently invent a mousetrap, someone who has a patent on the mousetrap, even if he gets it later, can stop me from using and selling my own mousetrap idea. Patent and copyright also undercut and undermine science in a host of ways. For example, patents distort research and development by steering it away from heavily patented areas. It also distorts it by pushing research and development towards more practical patentable gizmos and away from theoretical R and D because abstract ideas are not as easily patentable. So for example, E equals MC squared is not patentable, but a musical condom is. And as I mentioned earlier, patents even prevent the use of knowledge, even if you independently invent an idea. It also stigmatizes the very idea of emulation and copying or as we call it in the real world, learning. And that's why we have words like stealing and piracy apply to peaceful activity, copying and learning and competing. So we have these loaded pejorative terms that are applicable to a different type of action, right? It's a type of equivocation. Stealing means I take something from you and you no longer have it. That's why it's bad. That's why we oppose it. Piracy, real pirates were on ships and they would attack people and kill them and sink their boats. So they actually did physical damage in the real world. But these terms are used now for merely copying information and competing. And copyright is also dangerous, undermined science. It locks up written works. We have the orphan works problem. Tons of works are being lost because of the orphan works problem. It prohibits dissemination of ideas. It creates a culture in a publishing model that locks up important journals, articles and books. And it increases the time from submission to publication because people go through this model because they have no choice. Instead of self-publishing or going through cutting out the middleman. So the title of my talk was IP and the new mercantilism. Now mercantilism was heavily was at its peak in the late 1500s. Mercantilism was the policy of the crown protecting local industries by granting them monopolies, sometimes called patents. Back in the 1500s at the height, like in England, many goods were covered by patents like playing cards, leather, iron, soap, coal, books and wine. Not because the holder of a monopoly invented it or came up with it, but just because the crown was granting favors to someone, sometimes in exchange for the merchants agreeing to help collect taxes for the state. And what this did was it caused the monopolists, the private companies to turn to the government to perform search and seizures and investigate competitors who were going outside the monopoly. You know, they bust into a competitor shop and see if the playing cards on sale had the king stamp on the back or something like that. In France in 1666, the button makers guild demanded the right to search homes and arrest people on the street wearing cloth buttons made by the tailors. France even literally tortured and executed people for pirating fabric designs, broke them on the wheel. Some merchants even collected taxes for the king in exchange for the monopoly like the wool exporters. Now does this sound familiar? Today we have the RIAA and the MPAA asking for warrantless searches to stop DVD, piracy, or CD counterfeiting. Private companies are helping immigrations and customs enforcement or ICE, C's accused domain names without due process. ISPs like Comcast and Cablevision and Verizon and Time Warner Cable are agreeing with the government to help stop copyright infringement. Obama administration and the copyright czar, of course czar means Caesar, have been secretly cooperating with Hollywood and the recording industry to disrupt internet access for people suspected of violating copyright law. And that's for the tax issue. What we have is we have the software and the music and the movie industry and the pharmaceutical and the big smartphone industries they accrue these monopoly profits using the government's grant of monopolies and the forms of royalties and shakedowns of people using patent and copyright and even trademark law. And by decreased competition they acquire these monopolies. And then a portion of this money, this monopoly profit they make, is turned over to the state in the form of taxes or legal bribes called campaign contributions. So, and as another example, Microsoft makes monopoly profits because of its copyright monopoly over its software, uses that money to acquire tens of thousands of patents, another type of monopoly, then uses those patents to sue another competitor like Android smartphone makers or to extract a royalty, shake them down for a royalty payment and help cement their monopoly protection. So monopolies lead to monopolies and then some of these profits are fed back to the state to keep the state in bed with monopolies. So it's no surprise that in the earlier talk, I think by Ms. Stodden that the law that was proposed was fought back by copyright lobbyists. So basically mercantilism has not died, it's just become democratized and institutionalized which is another problem with democracy. So as the state, basically it's nothing but mercantilism where what's so-called property rights are used as a cover for these monopoly privileges. And by the way, patently copyright were not called property until fairly recently, say in the last century. People resisted these monopolies because they knew there was something wrong with it. That's why the constitution only allows them to be put in force for a limited time. It was like a limited special privilege the state was supposed to grant to encourage innovation. And by the way, there's absolutely no proof whatsoever that that happens. In fact, the proof is the other way around. But because there was opposition, the advocates of this started calling it a property right because people are generally in favor of property and hey, who's gonna be against property rights? Some on the other day on a podcast I listened to and said that children are like Hitler. And what he meant by that was that if you bring up these terms in an argument, the conversation has to stop because no one can be for Hitler and no one can be against children. So Congress calls these laws the Protect IP Act. Well, who's against protecting property? Or they come up with the No Child Left Behind Act. They put these nice terms on these laws to make it hard to oppose them. So, but I wanna make clear, a lot of opponents of intellectual property are opponents of property and that's why they're opposed to it. They're confused. The proper grounds to oppose intellectual property is a pro-free market, pro-property position. Okay, so what's the solution? The solution is not to go around saying the patent system is broken. It's not broken. It's doing what it's intended to do. It doesn't need reform. Reform won't fix anything. We just had a patent reform law that does absolutely nothing significant whatsoever. It's just trivial and nothing significant will ever be done in the name of reform. The problem is not software patents. The problem is not big corporations and it's not junk patents. It's not bad patent office quality. It's not the problem is not that the copyright term is too long and we need to fine tune it. We have to recognize that patent and copyright are completely antithetical to the purpose of property rights and the purpose of science. It undercuts property rights. It impedes science, both of which aim to overcome the problem of scarcity and to permit human prosperity. Intellectual property prevents owners from using their own property as they see fit and it intentionally inhibits the spread of information and learning or science. So don't reform patent and copyright. Don't mend it, end it. Now, let me just conclude. That was my conclusion, but I'll just mention something. A friend of mine is Nina Paley, an artist and I contributed to her book, Intellectual Puberty. It's a series of cartoons and I contributed to her Kickstarter project to get this printed so she sent me a bundle and I put them on the table up there. You're free to take them if you like. If you want more information on this, I did do a slideshow. I'm gonna post it on my blog later, c4sif.org, Center for the Study of Innovative Freedom, c4sif.org. And there's more information there, more systematic information, elaborating on the ideas I've shared today. And I also wanna mention I am the editor and the founder of an open source journal called Libertarian Papers, it's at libertarianpapers.org and it's completely free, open to the public and has no copyright restrictions whatsoever on it. So anyone interested in that, feel free to take a look and thank you for your time. So first of all, I wanna thank Joseph Jackson very much for inviting me to take part in this. What I've seen so far has been fantastic and I salivate looking at the rest of the program. Thanks very much for you too for coming on a Saturday and a Sunday. To a museum of computer history for what I think is gonna be a fantastic summit. So I'm not a member of the Austrian school, I'll admit that. I know a little bit about it, I know my Hayek, my Kelsen, my Mies, my Friedman. But I try not to take a position in part because I started out in science before I sold my soul and became a lawyer. I was a biologist, I got my PhD in genetics, I loved it, it was fantastic. But one of the problems that I have as an academic is I find it hard to take a strong position in favor or against based on philosophy alone. I like to see the evidence. And so what I've tried to do and what I'd like to present today is what I think is a new line of evidence about patents. Eventually I hope to expand this to include other forms of intellectual property. But in a very interesting way, I think the first talk and my talk are gonna dovetail. And come to some very similar conclusions. I'm a visiting professor at the University of Washington School of Law. I'll be at the MIT Sloan School after Christmas working with Eric von Hippel, one of the great proponents of open and user innovation. And my permanent home is the University of Kansas School of Law. What this really means is that I'm going for a high status on American Airlines this year. So what I'm gonna talk about is experimental evidence to support open science and innovation and the flip side of it may be a conclusion that is not necessarily friendly towards patents, despite the fact that not only am I not a member of the Austrian school, I am a patent attorney. So this is part of a project that I've been doing with Bill Tomlinson, who's at University of California, Irvine. He has a group called the Social Code Group. And it's an ongoing project. We've been working on this for five years. We will likely be working on it for at least another five. And a couple of other folks that have helped us very able coders, including Bryant Davies and Nitin Shantaram, who've both helped us create our experimental system, the data of which I'll show you today. We call our system the patent game, and I mean the double entendre. It's a game that people can play that simulates the patent system, but it's also meant to evoke the idea that there is an aspect of gamesmanship and an aspect of maybe politics in its not-so-nice form that underlies the patent system. I'm going to show you the results of two experiments that we did. One, to test the hypothesis that patent spur innovation, one of the basic questions of patents. And I'll give you what I thought was gonna be by conclusion before I started this. Before I started the experiment, I was sure that patents spur innovation. And I was hoping to be the first person that could actually provide definitive experimental evidence of this so that I would be the footnote in all the papers that said patents spur innovation. I was very excited about this. My friend Bill, my collaborator Bill, he thought the opposite. He thought patents are terrible, they're evil, and he and his co-dre friends told me, I can't believe you study patents, let alone believe in them at all, because you'll see, based on our game, it's gonna fail. We also looked at property rights. And property rights in a different sense than the previous talk, property rights by way of injunctive relief. If you prevail in a patent case, then the full weight of the state comes down against the party-found libel and says, don't do it again. We will not legally allow you to do it again. Versus liability rights. Liability rights represent a system whereby even if you're found to have violated patent rights, you can continue to infringe if you wish, but you just have to pay the price. You have to pay some sort of a royalty back to the owner of the rights. And so we tested the proposition that a property right in patent might have different outcomes than a liability right in patents. So I'm gonna share experimental results and in the spirit of full disclosure, all of my papers are freely available as PDF downloads at SSRN, costlessly. There's a reason for that, they're not worth much, but feel free to download them if you'd like, including some of the papers that go deeper into this topic. And then there's a Google tech talk that Google asked me to do last year. It's a much, much longer, I won't say richer, possibly more boring, but hour and a half long exposition of our methods and our results and some of what we think the implications of it are. And this was, by the way, given at Google a year ago before they sort of fell in love with patents. And at the time, at the time I think they really liked the fact that our results were a little skeptical of patents. I don't know what the result would be today or whether I'd be invited to give a Google tech talk. 17,000 patents from Motorola may change the culture a little bit. So patents in the US system at least have very strong legal support. They're right there in the Constitution in Article One. Congress shall have the power to promote progress of useful arts by securing for limited times to inventors the exclusive rights to their discoveries. Now I've lopped off the copyright portion only because we didn't test copyrights. The Patent Act, it's been around for a long time. It was just amended in many ways, although it's unclear yet whether these ways will be significant ways. And there's a traditional claim that's made that without the prospect of patent protection you'll get inefficiently few innovations. So that's the traditional claim. It's a claim that's been made for hundreds of years. And that's part of why we wanted to test this. This is a strong claim. And if it happened not to be true then it might limit the power of this because Congress shall have power to promote the progress of useful arts. But what would happen if the system they used didn't promote the progress of useful arts? Do they still have the power? Constitutional scholars are undecided about whether this is simply a phrase in the Constitution that says you can have patents or whether there's actually power to the shall have power if it promotes progress. So this whole project started when I was looking for a footnote. I was writing a paper, I needed a footnote that said patent spur innovation. So I sent an email to one of my research assistants, one of my best research assistants. I said, please just find me a quick footnote. I, in law, we're footnote happy. We like footnotes for everything. You know, the footnote definite article. My poor old research assistant came back with nothing. And I thought, you know, that's amazing because this person's been great at finding every little tidbit of information and they can't find a simple support for a well-known proposition. Well then I looked. I had trouble finding the kind of support that I wanted to use as footnote as well. All sorts of statements that they do but very little evidence underlining that. So I finally found a report by the national academies, patents in the knowledge-based economy, which has this, what I think, is a very stunning phrase. The literature on the impact of patents on innovation must be considered emergent. Now emergent to me is a euphemism. Emergent, emergent means there isn't evidence yet but it's coming, it's coming, just wait, it's out there, we'll keep our eyes open. And they also said later, the effect of patent policy has many dimensions, some fundamental to understanding the determinants of innovation generally. And these continue to challenge scholars both theoretically and empirically. Again, euphemism. I mean, there's theory and there's empiricism and there's not much else in academia and it challenges them on both sides. So I thought, you know, this is a call to action. Maybe I can be the footnote. So largely because my collaborator is one of the world's leading scholars of simulation games, we decided to take a simulation game approach. Couple of advantages that these offer. They can enable rigorous manipulation of experimental conditions. They integrate human interaction with real-time computational processes and they allow for precise data collection. In our system, we collect every single keystroke. We have so much data that if I tried to mine that data from now until the day that I die, I would never get through it. And we've only done five years worth of experiments. Interactive simulations are a subset of simulations and we decided to have interactive simulations that used humans. They're dynamic and one of the keys is they use human behavior to model human behavior. They generate a lot of data. You can use existing data to set parameters which is useful so you can feed the real-world system to a certain extent into your model. You can compare results based on alternative sets of parameters and you can directly test alternative hypotheses. All of these were music to my ears as a former scientist, a lapsed scientist. I thought, this is great. I can actually do scientific experiments in the law. Another principle that my co-author, Bill Tomlinson, thinks is very, very important, has written about. Says that if the game is compelling and fun, players may actually forget about the underlying simulation. This is important. You want them to become immersed in the experience. You don't want them thinking, okay, I'm trying to prove this. You want them to focus on a goal in the game. The goal in our game was making as much money as possible and we had financial incentives in favor of winning and playing, but if they could immerse themselves, this is an advantage from the perspective of these games. You only need to explain the rules. You don't need to explain what the goals of the game are. So we simply explained what the functions of the game were and we allowed people to play, but we didn't tell them why they were playing. We didn't tell them what the goal was. We didn't tell them what we hoped to find. We generated fairly good sample sizes and continued to do so and this is really an untapped data source, at least in my area of academia of the law. People just don't do this stuff, although they're starting to now. So we wanted to successfully simulate patent systems, collect and analyze all the data generated by users of the system and test specific hypothesis about patent rights. So for example, how do they spur innovation? Do outcomes vary with specific parameters and what is the optimal system for innovation? I know this is reaching pretty high into the sky and we've barely scratched the surface of any of these, but these are ultimately what we'd like to explore. We have a database structure that allows the implementation of almost any patent system function, although we don't implement every function all at once. I had a fight with my co-author at the very beginning. He said, write down all of the features you need so that the system is a meaningful representation of the patent system. So I gave him a list of 77 features. He said, okay, you can have eight. And I got him up to nine. So we have, and depending on how you slice and dice, we actually have a fairly rich representation of the patent system, but it's obviously not comprehensive. It has to be a simplification. We use an open source language to program this, and I don't know whether this maybe predisposes the results that I got, maybe built into open sources that if it's ever used to try and study patents, it will give an open result. I don't know. We aimed for ease of use, drag and drop inventing, pull down menus, event updates, auto refreshing, and the goal for the user was quite simply to win the game, and there were financial incentives, and probably social incentives too, based on what we saw in winning. We made inventing into a series of elements that you could put together and create inventions from. So combinations of elements were what we called inventions. You can make things and then sell it on the market, or you can patent things, and then later make it and sell it on the market. We take into account prior art information already out there which nullifies your right to get a patent. We allow people to license their patents, to sell their patents, to buy them to license in, and we also take into account of infringement and enforcement by having a court system. So if you have a patent and somebody infringes your patent, you're alerted that there may be infringement. You can take a quick look if you decide to sue, you hire some lawyers. They're told that they've been sued, and then they can hire some lawyers, and then we have a simulation of a court system. It relies on percentage probabilities of prevailing in federal courts over the last 25 years, federal patent courts. So we use real data to inform our little court system, and you can be assessed damages up to three times the value of what you have been assessed liable for, because in the patent system, there's a particularly bad form of infringement called willful infringement, bad, as in that's what the law considers it, because you multiply the damages by three if you're found to be willfully infringing. And we also allow, under certain circumstances, injunctive relief, and we have one system which is perfect injunctive relief. So if you are found liable for infringing and then you try and make that patent a device again, you're simply told by the game, sorry, there's an injunction against that, you can't do it. We can adjust patent term, make it longer, shorter, and there are costs. There's costs in money, costs for prosecution, getting the patent, costs for litigation, and there's costs in time. There's opportunity costs. If you decide to litigate, you won't be doing as much inventing. People have pointed out that this is more high fidelity when it comes to smaller inventors or smaller companies, because large companies have entire departments that can sue while other departments invent. We can also do multiple users versus no users. We can have computers play against each other. There's a lot of flexibility. This is sort of an example of the interface. In the upper left-hand corner, according to where you're looking, we keep track of people's money. There's a design box, a sort of inventing box, and you drag those letters or they can be symbols, they can be two-dimensional, they can be three-dimensional. There's no limit on that. But you could drag, say, a C, a D, and an E down, and you could make that. It's worth a certain amount. We have distributions of values that are assigned before every game. So the same CDE will be worth different things in different games. So you can't learn how to make the right things. You have to explore the inventing space in every game. Or you could patent things. License and sell up there. Your portfolio sort of kept track up here. We can also take this information off the screen. So in some games, we don't let people see all this information. In other games, we give people complete information about what's happening. We've got an event log down here. For example, Alice patented AC, Alice made DBA, Carol patented AE, et cetera. There's a number of potential strategies you can imagine people would use. Some people, I'm from Canada, so this is what I call the Canadian strategy. Play it safe. Canadians aren't, they don't like to be rude. They don't like to infringe other people's property rights or intellectual property rights. So you can just play it safe. If somebody has a patent, you stay away from that. If you infringe accidentally, you say sorry with a very short vowel. You can be fast and loose. Just who cares, who owns what. I'm just gonna make what I want. And if I get sued, I'll deal with it then. All sorts of more sophisticated strategies. You might spend a lot of time working on your strategy at the beginning, not make much money. And then later on, start to pull in the crops in metaphorical sense. So you might decide to strategically patent a whole bunch of things that you think other players will need later on. And then later act as a patent troll. And just sue, sue, sue. There's licensing strategies, selling strategies, enforcement strategies, all kinds of mixed strategies as well. Some observations before I show you some data. Players seemed to really like playing. Some people got obsessed by it, would phone me at night and say they wanted to play with their friends at home. Players seemed to enjoy winning. Lots of whooping and fist pumping, et cetera. Players seemed to want patents when they're available. Players invent selectively and strategically, at least that's what it appears. Players often will license their works out or license other people's works in. Sometimes they'll buy and sell. Players often litigate too and they get quite excited about that, excited usually in a negative sense. People get angry when people infringe. And the players seemed to care about the legal rules. The legal rules seemed to mean something to them. So our hypothesis was the prospect of patent protection for inventions promotes the progress of useful arts and more than will a commons in which there's a free-for-all. No patent protection available. We did properly approved trials because there were no injections or electrodes. We had a relatively easy ride through the IRB approval process. And we tested three systems. A pure patent system where the patents were available and enforceable. A system that is not exactly open source. It's our version of open source in which you could either patent things or you could affirmatively make them unpatentable by open sourcing them. You could click them in sort of like a negative patent. And I realized this is not like copyright or copy left open sourcing but it was our sort of try. And then a pure commons, no patent protection available whatsoever. For the data I'm about to show you, here are sample sizes. The duration of the games were 30 minutes and the controls, the availability of patents or patents plus open source varied. So here's what we got for innovation. And what I mean by innovation here is the number of unique inventions created during a 30 minute period. So as you'll see the pure patent system, roughly 80. The patent open source system statistically indistinguishable but the pure commons with no patents actually produced quite a bit more almost up to a hundred. This is statistically significantly different. So that's number of unique inventions. We also looked at productivity. The total number of inventions whether or not there's repeats made in a period of time. And here the pure patent system and patent open source system fall back compared to the pure commons which basically doubles output. And then we tried to measure wealth. So the amount of money generated in the system and we found that the pure commons completely outperformed the pure patent and the patent open source system. The patent open source looks slightly taller it's statistically insignificantly different from the pure patent system. Okay, some possible explanations. Maybe it's just a terrible simulation. Okay, maybe this is just garbage. A lot of you are probably thinking that right now. Maybe in general it's a bad system. Maybe unless the parameters are set properly and by implication we set them wrongly. Maybe unless the players are chosen properly and we didn't set the players properly. Or there's an alternative. Despite received wisdom, commons actually spur innovation better than do patents. Now some of you might ask why do I have a picture of cows in a high alpine meadow in Switzerland? And the reason is Eleanor Ostrom. Eleanor Ostrom who won the Nobel Prize two years ago for economics even though she's not really an economist. She studied this phenomenon of tragedy of the commons. It's accepted wisdom that if you put a bunch of cows into a village green they'll eat the grass until it's all brown and dirt. Actually that seems to have occurred mostly in England and there may be uniquely English reasons why the English weren't able to keep their cows from destroying commons. But in Switzerland the Swiss seemed to be extremely good at maintaining commons without legal rules. So they have all kinds of commons that remain green year round. There are social mechanisms for enforcing anti-social behavior or too much cow munching of grass. But interestingly it's not necessarily true that commons fail. And fortunately she was recognized for this by the Nobel Committee because for a long time she was a voice in the wilderness against the traditional view that put stuff out there and it will always disappear. It'll always get gobbled up. So maybe actually things like the tragedy of the anti-commons, Heller and Eisenberg or the benefits of commons that Von Hippel, Bankler, Lessig, Besten and Moyer or Ostrom have pointed out maybe there's something to it. So a second experiment we did we thought we would try and tease out some more of these phenomena. We decided to look at property rules in junk of relief, strong, strong patent protection or liability rules. You can do it, you can infringe, but you have to pay the person a reasonable royalty based on the fact they own a patent. This came out of a paper in the law, it's a very famous paper called Property Rules, Liability Rules and Alienability, one view of the cathedral. The cathedral in question is the cathedral at Rouen and Monet spent a period of six months in Rouen painting the same cathedral again and again and again under different light conditions, different moods, different seasons. It's a fabulous paper, it sets out this idea that depending on the legal rule you might get different outcomes. And so I actually did a fellowship a couple of years ago and some of the faculty were Austrians. Fred McChesney for example, Henry Butler, Henry Manny, a bunch of other Austrian law and economics folks, and one of the suggestions they had was to test our system using the property rule, liability rule rubric. So property rule is an entitlement protected by a property rule to the extent that someone who wishes to remove the entitlement from its holder must buy it from him in a voluntary transaction in which the value of the entitlement is agreed upon by the seller. The flip side is, if I don't wanna sell you my entitlement, I don't have to, I can hold out. Liability rule, liability rule denies the holder of the asset the power to exclude others or indeed to keep the asset for himself, rather under the standard definition he is helpless to resist the efforts by some other individual to take that thing upon payment of its fair value as objectively determined by some neutral party. The neutral party, that's the court. In economics and in law and economics there is very strong support, at least on the ideological side for strong property rules and there may be something to this. Epstein, professor at the University of Chicago has said in any comprehensive legal structure property rules should dominate liability rules as indeed they do and he went on to say the standard practice in virtually all legal systems assumes the dominance of property rules over liability rules. Now he's talking about physical things. He's not talking about intellectual property but we thought we'd like to look at this in an intellectual property format. So here's our hypothesis. Patent property rules by way of injunctive relief will promote the progress of useful arts, innovation more than will patent liability rules, damages. The traditional claim again without the prospect of patent protection fewer useful inventions will be generated. The property claims without strong patent property rules injunctive relief, fewer useful inventions will be generated. So it's sort of a strong version of the very first hypothesis not just patents of any kind but strong patents with strong injunctive relief. Again, IRB approval. Here are the four treatments that we did. Here are the trials and the same duration for the data that I'm gonna show you as the previous trials. And by the way, our subjects are paid for participating and they're also paid a bounty if they win. And this comes out of the experimental economics literature it says you have to pay people just to show up and you should have an additional incentive so they really, really try to excel at whatever system they're playing. Okay, so our four treatments. Again, we use the same sort of proxies innovation, productivity, wealth. And here's what we found for innovation. So unique inventions. Interestingly, again, the system with no patent system does very, very well. But which among the damages versus injunctive relief for the liability rules versus property rules does better? Well, damages actually does better than injunctive relief and sort of fascinating injunctive relief plus damages does the worst. Statistically, injunctive relief and injunctions the same but damages actually statistically different and the neither is just in the stratosphere. How about productivity? Well, under the productivity the total number of inventions made injunctive relief damages and injunctions stays relatively low. Damages actually does pretty darn well. It starts to approach the common system. They're still statistically different but it starts to approach it. And then in terms of wealth we get a similar outcome. So here, if you parse the patent system the results show that having a liability rule. In other words, letting people infringe but they have to pay for it. They have to pay some sort of reasonable cost. Maybe a better system for generating innovation than telling people they must not infringe and then using allowing access to the court system to draconianly prevent that from happening. Okay, so innovation, productivity and wealth under the system of rules. It's highest without rules. So this is consistent with all of the experiments we've done. The common seems to do really well. It's relatively high with a liability rule. It's low with the property rule and it's lowest with both rules. Although property rule and both rules not statistically different at a 5% level. So perhaps liability rules spur innovation, productivity and wealth more than property rules. This challenges the traditional view in patents that injunctive relief is very, very important in the proper functioning of the patent system to generate innovation. And what's fascinating to me is that in 2006 the Supreme Court dealt with this very issue. Before 2006, the patent court is called the Court of Appeals for the Federal Circuit in Washington DC. They had a rule that if you had a patent and there's a finding of liability as of right, you automatically got an injunction. There was no inquiry into it. If there was a finding of liability, the owner of the patent got an injunction against the infringer. Now that's different than every other form of law where you have to go through a four pronged analysis that includes for example, consideration of the effects on society of granting such powerful legal relief. And oftentimes you don't get injunctive relief even if there's a finding of liability outside the patent system. Well in 2006, the Supreme Court considered this unique strong property rights patent rule and said, this is ridiculous. Patents aren't different than any other form of law. And of course you should consider factors such as the interests of society. And we're not going to allow injunctive relief to be given as of right. From now on, you'll have to go through the analysis and in some cases it'll be appropriate, other cases it will be wholly inappropriate. We will not give injunctive relief. We will give damages, but not injunctive relief. Since that time, the number of injunctions in patent cases has gone from almost 100%. There were some outliers occasionally down to about 70%. So still high chance of getting it but there's about a third of the world that's now carved out for no injunctive relief in the patent world. So the choice of legal rules may affect innovation, productivity, and wealth incomes. Sorry, wealth outcomes. Possible explanations. Again, maybe we just failed with our system, maybe the parameters are bad, maybe the players are bad, maybe our sample sizes, or the period of time we played the game are just too low, all possible, all possible. We'll continue to explore these. Another possibility is that patent damages spur innovation and generate wealth better than do patent injunctions or patent damages plus injunctions. In other words, liability rules outperform property rules in patent law. Don't forget also underlying this is that the commons appears to outperform in our system at least, all systems of patents or quasi patents. So we're continuing to look into this. We're always looking into our theoretical framework and we welcome suggestions about it. The experimental design, we're constantly tweaking it playing. We've about five versions of the game now. We're looking into what parameters might affect outcome the most. So for example, prosecution costs, there's a lot of criticism of the patent system. Maybe if prosecution costs were higher or lower, that might affect outcomes. Enforcement costs, it currently costs between three and six million dollars to enforce a patent. Maybe that's a significant reason why the system works or doesn't work. Patent term, how long it is, how prior arts treated. The new patent law will actually make prior art more strictly apply. It will be harder to get a patent now if you don't rush to the patent office and file as soon as possible. Whereas before there was more time to wait around and see if your invention was worth filing on. Information costs, knowing what other people are doing, number of players, game duration, damages, injunctions, we're looking into all of these. We're also very interested in user characteristics and we're starting to use different groups of users to see if the outcomes depend on that. The interpretation of our results, we're trying to be careful about our interpretations. The conclusions I'm giving you are from within a simulation system. They don't necessarily apply to the real patent system. Although I think that based on all sorts of other evidence, it's intriguing that it's lining up with a lot of the critics who say the patent system may not function or may not function as well as we once hoped that it would. One of the questions that we have in our research is can data justify patents as pro-innovation? So can we find situations in which the patent system is doing well? I think there's a hint of this in the liability rules. If we had to choose between liability rules and strong property rules, maybe we ought to let people make other people's inventions but pay them a reasonable royalty instead of allowing them an absolute right to say no. So to conclude, there is a mysterious and distinct lack of empirical evidence supporting the patent system. This is sort of explained away with waved hands in most presentations about patents. Experiments suggest that patents may harm innovation at least under a certain set of conditions that we've explored so far. This chords with Von Hippel's work and you should read his book, Democratizing Innovation If You Haven't. By the way, it's freely available for download on his website in PDF form. Patent failure by Besson and Moyer are two fairly serious economists who said that the patent system does not appear to be performing well in terms of costs and benefits. They said for most technologies except for biotech and pharma, they think the costs are clearly higher than the benefits to society of having a patent system. Bolton and Levine have a very strong position against patents, copyrights and other forms of intellectual property. Although interestingly, they kind of like trademarks. They think trademarks are different. Bankler, Lessig, Ostrom, Heller, Eisenberg and an increasing chorus of voices are raising the possibility that we don't understand intellectual property the way we thought we did and it may actually have harmful effects rather than the beneficial effects that the Constitution in Article I says it ought to have. So we think we need to explore the patent innovation landscape thoroughly. Biotechnology is an interesting case because biotechnology is a specially fond of patents. The entire industry was based on a Supreme Court case in 1980 that allowed the patenting of, quote, anything under the sun that's made by man, genes, organisms, et cetera. Even that has come under attack in the last three years under sustained attack. In the ACLU versus myriad case where a judge in the Southern District of New York found the patenting of genes based on a lawyer's trick and said you can't do it, that was overturned by the Court of Appeals for the Federal Circuit, but it still remains to be seen whether the Supreme Court will take that case up and there's a good chance that it will and if it does, I suspect it might not be a positive result for the holders of gene patents. There's another case called Prometheus versus Mayo which is before the Supreme Court and is looking into biotech, diagnostic, and therapeutic methods. Most commentators that I know believe that Supreme Court would not have taken the case up if they were going to affirm the patentability of such biotech claims, although you never quite know. And the Department of Justice which was one of the defendants in the ACLU versus myriad case. It was one of the people that ACLU was suing. They were saying the PTO does, the Patent Office does not have the right to issue patents on genes. Well, the Department of Justice that represents the Patent and Trademark Office at the last minute filed what's called an amicus brief, a friend of the court brief in which they said, you know what, even though we're the defendants, you're right, you shouldn't be able to patent genes, at least certain kinds. And so just before Halloween last year, they against the Patent and Trademark Office wishes, they submitted an amicus brief saying natural source DNA, that really shouldn't be the subject of patents. Maybe synthetic DNA, maybe that's appropriate, but not natural source. And then the America Invent Act has a really interesting provision that I'm currently working on a very early stages of paper on. Section 33 of it says that you cannot patent a human organism or anything directed to or encompassing a human organism. Now that may end up, depending on what the courts say, include genes, stem cells, methods of diagnosis, methods of treatment, all sorts of bread and butter technologies of the biotech industry. You might ask a question after seeing these graphs, would that be bad for biotech or could it be good? Could it actually foster open biotech and might that lead to a better biotech? The final thing I wanna sort of suggest is that rather than luxuries to be tolerated within the law, open science and open innovation may be vital to innovation in biotechnology and other fields of technology. I think until this time, they've really been seen as the eccentric cousin. Very well meaning and in certain circumstances maybe producing good results, but the evidence in favor of strong intellectual property, at least in patents, I think is lacking enough that it might make us question that view that sort of sidelines, open science and open innovation. Perhaps open science and open innovation, perhaps that ought to be the mainstream mechanism for generating innovation. Maybe patents ought to be the luxury to be tolerated in certain circumstances. Thank you. All right, thank you for that, that was excellent. Misha is gonna step in here now to talk about one particular ongoing kind of horror story example of the patent system gone wrong and how that sort of goes beyond what we've, yeah, just plug it in there and then should be able to run it off there. You know, it really affects the whole sort of innovation ecosystem. And so we're looking at particular example in biotechnology where you can sort of see the worst case scenario. And then we're gonna have some time for discussion after that and we'll be heading right into lunch just across the way and I will direct you guys there momentarily. Got it, figured I had to advance them. All right, hold on. So I am apologizing in advance for the series of lengthy, illegible, disorganized slides you're about to see. But I hope I don't completely undermine the story I'm going to tell because it really is remarkable in many ways. And I think I've been set up very well by the previous two talks, both of which were excellent. And I can't say how refreshing it is to not be the only fire-breathing radical on a panel. So I was trained as a geneticist as well. I work at Duke University in genome sciences and policy and I've done some work on intellectual property and gene patenting and this case came to my attention and my colleague's attention when the plaintiff's attorney for a group of patients suing Genzyme contacted us and wanted some information and advice. And the more I looked into it, the more sort of fascinated I got with what was going on and decided that instead of doing research to produce generalizable knowledge, as we say on the IRB, that I would just try to write a magazine article about it and so I've been working on that for the last several months. And so that brings me to this forward-looking statements Flaming Hypocrisy Disclosure Slide, which is you are free to do what you do, rebroadcast and I know we're live streaming and everything, but it's very important that you understand that this is a work in progress. I'm filling in at the last minute and I'm working on this story as a journalist. None of this stuff has been fact-checked or peer-reviewed and I'm gonna do my best, but ultimately the goal is to publish something that will get as many people's attention as possible. So what is Fabray disease? I'm wondering if there's any way I can make this bigger because I'm so myopic and I know if I switch displays I'll be doomed. It's an X-linked recessive disease. It's very rare. It's an enzyme deficiency and it leads to a progressive accumulation of metabolites in the cell, affects about one in 40,000 males worldwide and one in 200,000 newborns. There are many mutations in the GLA gene on the X chromosome and it's characterized by recurrent severe pain episodes in the extremities mainly. So a patient told me, I said, how do you feel right now? And he said, well, like a thousand needles are jabbing my foot and it has various other clinical features. I'll show you pictures of those and a lot of patients who live into their 50s and 60s wind up with end stage renal disease and various heart problems and susceptibility to stroke. Females, unlike what you were probably taught in high school biology, they are not merely unaffected carriers. So there's a phenomenon called X in activation where one of the two female X chromosomes is turned off and this is done randomly during embryogenesis and depending on how that process goes, females can be quite severely affected as well and their lives tend to be reduced on the order of 15 years. Male life expectancy is reduced by about 20 years so that thing stained red is a lysosome. It is essentially the recycling center of the cell and when this enzyme can't do its business, the cell fills up with junk and this is a graphic depiction for those of you who are biochemically inclined. These are angio keratomas. They're characteristically around sort of the middle of the body and a visible symptom. They're also so-called corneal opacities so fibrae patients often get diagnosed by dermatologists and ophthalmologists and kidney docs and there's actually been some work done. There's a very subtle sort of characteristic fibrae face so like other diseases inborn errors of metabolism, we call them. They are enzyme defects and there's a guy named Roscoe Brady who still comes into work every day at NIH who showed in the early 70s that you could actually give people enzyme, give people with lysosomal storage disorders including fibrae disease, enzyme and you could alleviate their symptoms. The problem at that time of course was where did you get enzyme and initially they had set up this kind of placenta processing factory. They were getting thousands and thousands of placentas sent from all over the world just to produce a few milligrams of enzyme. The recombinant version of the alpha galactosidase A gene was quote unquote invented by a guy named Bob Desnick at Mount Sinai School of Medicine. He is sort of one of the towering figures in lysosomal storage disorders and fibrae disease in particular and there was a series of clinical trials and ultimately Fabrazyme, the recombinantly produced enzyme was approved in Europe in 2001 and in the US in 2003. This is the sort of 804 patent, the main patent at issue in the litigation I will mention and this is a fairly remarkable document that has been filed actually by the defendants in the litigation and it is the licensing agreements between Genzyme and Mount Sinai School of Medicine conferring an exclusive license to Genzyme to make and sell. Unfortunately all of the numbers are blacked out and I assembled this figure from various public sources, SEC documents and analyst reports and Replegal is, I will tell you about it, it is a similar enzyme made by a company called Shire Pharmaceuticals based in Europe and they were neck and neck in the early 2000s. And are co-exclusive in Europe but Replegal was not approved in the US, it was then made by a small biotech called Trans-Cariotic Therapies and you can see that Fabrazyme was the 800 pound gorilla until about 2008 and then its sales started to drop off and we will get into why that happened and Replegal was the beneficiary of that at least in Europe and the rest of the world. So as I mentioned it was approved in the early 2000s and there have been some post-marketing studies, most of these studies are small because there's so few patients and they manufacture it in Alston, Massachusetts, most of the stuff is done there. The thing that initiated this whole area was the fact that Fabre disease and Gauchet disease and Pompey disease, if you've seen that movie with Harrison Ford and Brendan Frazier whose name escapes me, that's about Pompey disease, Genzyme also makes a treatment for that. So these are diseases with less than 200,000 patients that makes them orphan diseases which gives inventors of treatments for those diseases seven years of exclusivity above and beyond the exclusivity conferred by the license that Mount Sinai conferred to Genzyme. So as I said, things were going swimmingly and they even raised the price for a 70 kilogram man, the cost of a year's supply of Fabrezyme or Replegal is on the order of $165,000 and I think for Syrizyme, the treatment for Gauchet disease, it's actually well into the $200,000 to $300,000 range. By 2009, it was approved in 40 countries. Last year, that seven year period of exclusivity ended and in 2015, the 804 patent will expire. So what happened in 2008? The FDA inspected the Alston facility. It didn't like what it saw and issued a Form 483 and if you are in drug manufacturing compliance, that's not something you wanna get. And Genzyme's account of this visit said that that the FDA saw significant deviations in compliance, but we believe that the products produced at our Alston facility continue to meet the highest quality and safety standards. So one of the curious things to me was even before this inspection took place, Genzyme had initiated a study of what happens if you cut the dose of Fabrizyme to Fabray patients. And so this was published in April of 2009 after that inspection, but before there was any official shortage and the conclusion said, nevertheless the results clearly show variability and responsiveness to the lower dose of Agalcidase beta and suggest that dosing strategies that deviate from recommended dose be systematically monitored. So why is this telling? Well, so this study was funded by Genzyme and it included six months on full dose. These are adult male patients and 18 months on one third dose. So this was actually launched this study, presumably in 2006. 2009, lots of bad stuff started to happen, namely viral contamination. And the company was updating the FDA on what was going on at the Alston facility. The FDA sent a warning letter and finally in June Fabrizyme shipments were suspended for the rest of the year and the FDA asked for detailed explanation. Another company sued for patent infringement. There was another inspection, there was another form 483. And in December, replagal became available to a small number of patients on a pre-approval basis which basically meant that Shire Pharmaceuticals which by now owned replagal was giving the drug away and they did that for 140 or so patients before saying no mass. And then at the end of the year, Genzyme subcontracted its fill and finish, the last stage of drug preparation operations to Haspyra. And things just went from bad to worse. There was a report of pieces of steel and rubber and other contaminants in Genzyme's manufacturing facilities. In 2010, in the early part of the year, the shipments resumed but patients were on one third dose. And the company admitted that their cells were growing more slowly and by June, the replagal access program ended very suddenly. FDA ultimately said this is gonna cost you guys $175 million. There was a so-called consent decree and this was the, this is my favorite term, the disgorgement payment of $175 million. And FDA is presumably overseeing all Genzyme manufacturing. So what about replagal? As I said, it was developed by a small biotech in the late 90s. By 1999, it had fast-track status. It had orphan drug status. It submitted for approval both here and in Europe in 2000. Genzyme sued for patent infringement. And Transcariotics said, oh yeah, well, two can play at that game. In 2001, the FDA requested additional data. It launched in Europe that year. And in 2003, the FDA said your endpoints don't demonstrate your endpoints don't demonstrate efficacy and we want a head-to-head trial. And there was various other legal proceedings. By 2004, it was available for sale in 28 countries. In 2005, Shire bought TKT for $1.6 billion. In 2009, it resubmitted to FDA. And in 2010, FDA said, well, we need more pharmacokinetic data. And so Shire withdrew its application again. Now, this is, as you understand, already well into the Fabrissheim shortage. And meanwhile, Mount Sinai sued Shire for patent infringement in the EU. And the replical patents will begin to expire over the next several years. This is from the patient's petition to the FDA citing 11 instances where Genzyme said, we will have our manufacturing back up by such and such a date and it didn't happen. Or we will have our supplies back up to normal. Genzyme is banking on its new facility in Framingham Mass, which will include four 2,000-liter bioreactors for its leading products, including Fabrissheim. So these drugs are very difficult to make. There's no question about that. And the latest is that this new facility will be approved and that Fabrissheim supplies will be back up in the first half of 2012 and patients are understandably skeptical. So this is from a recent sort of supply update letter to patients and physicians. And Genzyme says, Alston is never going to deliver supplies and we're counting on this new facility. So it's relying on various things. Meanwhile, earlier this year, Genzyme was sold to Santa Fe, a French biotech, a French pharmaceutical company. It was the second biggest biotech deal ever, a little more than $20 billion. And one of the things that I'm sure Alan Black would discuss if he were here was this view that European Fabray patients are being treated differently than U.S. patients. And so this goes back to the original announcement of the shortage in June of 2009. Genzyme convened a group of so-called stakes, holders, you can't see their names. It doesn't really matter who they are. They are a group of Genzyme employees, docs and patient representatives, all of whom in one way or another are funded by Genzyme. So there was never anyone truly independent on this group. And they said, sorry U.S. patients, you're going to stay on reduced dose. So instead of getting your drug every other week, you're gonna get it once a month. And meanwhile, in Europe, physicians were told if your patients are getting sicker and inevitably they were, then you can restore them to full dose. And we see several examples of this in dear healthcare provider letters. And this became public, the European Medicines Agency, the equivalent of the FDA said, we want our patients on full dose. The FDA's never said that. And in the wake of the lawsuit, Genzyme says, why are patients treated differently in different regions globally? Why are patients in Europe treated on full dose and not in the USA? Genzyme says, well, we don't make treatment recommendations. We're just a drug manufacturer. So, you'd have to talk to those doctors in Europe. Patients have petitioned health and human services, both NIH and FDA. NIH has denied this petition saying if we march in, that is if we liberate the 804 patent, it's not gonna help because we're gonna need years of clinical studies and regulatory approvals. Anybody who's interested can still do clinical trials and Genzyme appears to be working diligently and in good faith to fix the shortage. And so, last year and again this year, patients have initiated a class action suit. So where are we now? Well, it's still possible that FDA can hasten the approval of replagal in this country. I confess that I'm mystified as to why that hasn't happened. Except for individual patients, I think you could argue that everyone in this story has a conflict of interest. The court case is probably going to take years, so it's probably not going to help this current group of adult patients whose kidneys and hearts are deteriorating. Admittedly, Genzyme took a risk in the 1990s in developing this kind of therapy when no one else was interested. It has undoubtedly improved thousands of lives, but somehow it went off the rails. And just because I'm a provocateur, I leave you with this quote from the outgoing CEO of Genzyme who said we created a very successful company that's not going to disappear. That will continue to grow. We created a company worth a minimally $20 billion plus. I feel identified with some of that. I'm not a manager. I didn't take care of an existing asset. I created value. So I don't feel tremendously sensitive on receiving as much as $221 million after the sale. That is him personally. But I completely accept that these numbers are high. It's just the way it worked out after 30 years. So I'll leave you with that. Thanks. Okay, we can do about 10 to 12 minutes, and then we're gonna go ahead and break for lunch at that point. If anyone has questions to start off with, they can start kind of queuing up over here by the mic. And the panelists are gonna be available to answer that. All right, we've got a few going here. Good, okay. Thanks for the great story, Amisha. What I'm interested in hearing about is you talked a lot about the patent side of things, but do you think that more transparency within the FDA would help the patients, and where does that transparency need to be? Well, thanks for that fat pitch down the middle. Yes, absolutely. So if you read that book I put up, there's a chapter on the Fabrizheim approval in the early 2000s, that book by Merle Guzner, the $800 million pill. And it describes the trials as using different endpoints, and so Fabrizheim was measured on its ability to reduce the levels of a certain metabolite in kidney, whereas transcariotic used pain. But in my reporting, I haven't really had a good explanation as to why FDA has sort of jerked transcariotic and ultimately shire around. And I find it disturbing that, for example, FDA would ask for more pharmacokinetic data when clearly by its own admission, this is an emergency. Do you see any sort of a better way to apply pressure to the FDA other than through journalism? Well, you know, I'm not a lawyer, nor do I play one on television, but it's become increasingly difficult for me not to be sympathetic with the plaintiffs of whom they began with six and now there are more than 50. And you can see this trend even on the Genzyme funded patient support group websites where initially there was a lot of defensiveness and a lot of Genzyme has saved our lives, and now you see a lot more hate or aid. I, this question is addressed to the patent lawyers on the panel. I'm really glad you brought up the Prometheus and the Myriad cases, they're slightly, you know, they're different. Would you care to venture a guess? I mean, when you take a look at what type of policy is trying to be defended by the various decisions and a variety of gene related patents, it looks to me like a drunk man's random walk. I don't see any way of connecting the dots and defining a policy there that would separate methods to produce versus what's out there naturally. Could you address that a little bit? Go ahead. Sure, I'd be happy to try. I'm describing a drunk man's walk as entertaining, so I'll give it a shot. Back in 1980, we have this landmark decision where it appears that many biotech categories of inventions are patentable and that the Supreme Court's thrown open the doors of what you can cover. For years and years after that, it was assumed that gene patents were patentable, but there was no landmark case that specifically stood for it. And over the years, I think the Court of Appeals for the Federal Circuit, the Patent Court, that deals with 99% of these disputes. The Supreme Court only cherry picks an occasional decision from the Court of Appeals for the Federal Circuit. So the Court of Appeals is in some ways the Supreme Court of Patents until they get slapped down by the Supreme Court. For years and years and years, they just assumed that these things were patentable. And so the weight of precedence gathered in favor of patentability. This was, I think, relied upon by the biotech industry and not just the industry, but also universities because universities are often the first instance where these inventions, and I put inventions in air quotes for those who need them, are patented in universities. Some universities make a lot of money from this stuff. Most universities barely scrape by and meet their technology transfer offices budget. In 2005, this obviously came to head when the Human Genome Project was wrapping up, when Celeria and the government were racing to the finish line, and people were worried that there'd be a patent on the whole genome or a patent on 30,000 genes. I actually filed a patent application in 2000, yeah, just in 2000, just before the big press release that Venter and Collins gave for a particular company who's late on a Friday night, we filed a patent application to cover 120,000 human genes all in one application. And it turns out there's only 18 to 20,000, so I'm not sure how valid those claims were. Never heard from them again. But in 2005, it was sort of the first chink in the armor. There was a case called Fisher that involved not whole genes, but fractions of genes, ESTs, express sequence tags. And that's sort of a landmark case here because the court applied some old doctrines about whether an invention had to be useful or not and how useful it had to be and how directly, immediately useful it had to be. And they said that fractions of genes, even if they're useful for finding full genes, don't have sufficient utility. And so that was the first big setback. That's 2005. Then you get the ACLU case winding through the courts in the last two years, maybe done, maybe not. I suspect the Supreme Court might take it up because it's a nice, thinking of food and wine, it's a nice pairing, the Prometheus case and the Myriad case. And they both involve diagnostic methods. Right. I think that the Southern District of New York decision, even though it's been overturned, is going to resonate for years as a warning to biotech and a warning to folks that are trying to patent things that some people could characterize as phenomena of nature or aspects of nature because the judge didn't find that the patents were invalid after a long trial. The judge actually used the very initial decision-making power that he had on what's called summary judgment and said absolutely they're not patentable, it's ridiculous that they ever were. Now he was overturned, but summary judgment, the standard for summary judgment is that there is no factual dispute whatsoever, it's simply a legal question. In other words, it's a no-brainer, it's a slam dunk. And so for a fairly serious court, the Southern District's very influential to find on summary judgment that it wasn't patentable. I think that indicates there's a sort of anti-gene patent view percolating through the federal court system, percolating through the government. The Department of Justice has said that they don't feel comfortable with natural source genes. And it was just remarkable, they were defendant. So they were defendant throwing up their hands and surrendering and saying, you know what, you're right, we don't think it's true either. So regardless of whether the Supremes take it up, I think natural source gene patents may have their days numbered, partly judicially, partly because of this new section 33 of the Patent Act. The, it's based on a provision that's been floating around since about 2004, it was a congressional writer for years and years and years, it said the Patent Office couldn't use funding on human inventions, but the version that made it into the patent reform is very broad and the courts will have to interpret it what it means, but presumably a gene could be interpreted as being directed to a human organism. But on top of that, the genes on human, the patents on human genes, which spiked around the beginning of the 2000s and then declined after that because there's a finite number of them, they're gonna come off patent in the next 10, 15 years. And synthetic biology I think is likely to replace at least some of the natural source genes as being the new source for genetic patents. Now, synthetic biology may not solve the moral problems that people have with gene patents, but I suspect it'll be harder for the courts to invalidate them based on existing patent law. If they're engineered from scratch, they sort of answer a lot of the technical problems that natural source genes have. So it may be that a generation from now we're dealing with only synthetic genes that natural source patents are no longer an issue, but I think forces from the judiciary to technology are conspiring to sort of end that whole debate and I don't think that it will probably end well for the owners of vast portfolios of natural source human genes, especially if the Supremes take it up. I think if the Supremes take it up, they may simply say you can't patent stuff like this, it's a phenomenon of nature. Do you see a way of distinguishing between methods development for diagnostics versus the knowledge-based existence of the gene, the existence of the natural phenomenon? Well, what the courts have said so far is that to the extent that the method could be carried out in a physician's mind without the use of a piece of equipment. That's not patentable. That's invalid under what's called the mental steps doctrine. But this is also true of software and what's happened in software, there's the variety of what some people call lawyers tricks that insert a computer into the system or insert a machine into the system. And so if the machine or the computer or the system itself is patentable, there's a principle that says if that's patentable, merely associating some ideas with it doesn't make it unpatentable. But a simple physician's test or diagnosis may not require a machine. I mean, knowing the sequence and comparing it to another sequence, a reference sequence, or measuring the level of a metabolite, that's something that I think often can be done in a physician's mind and to the extent it can, I think that's deadly to patentability. And I think the Prometheus case is likely to put an end to a lot of those patents and not just those because the Prometheus case was remarkable about it. It's not just on methods of diagnosis. The Prometheus case, it takes samples from a patient. The claims take samples from a patient. They measure them. That's sort of classic diagnosis. I don't think that's probably on the patentable side. But then they calibrate a specific treatment schedule and then they inject and then they test again. If the Prometheus case fails based on diagnosis and therapy, then I think all diagnosis is likely gone. And a lot of therapy, methods of therapy, are gone along with it. All right, everybody, we're standing in the way of people's lunch, so we're gonna do these last ones, rapid fire, and then we're gonna wrap it up. Quick question for the gentleman who was doing the game simulations of patent systems. I was just curious if you had looked at or had any interest in looking at the power of founder effects in the patent systems that you were testing, because as somebody working in biotech, I would be slightly worried about the benefits to a freer patent system accruing to existing market players who are already at foothold. So we haven't looked at that, but it's a great question. We are interested in it. Even without a patent system, you get all sorts of antitrust problems with monopolies that are created through capturing market power. So yeah, that's worth looking into. We haven't done it, but we'd love to. Okay. Laura. Last two. All right. All right. You wanna do it? Why don't we just give it about two minutes to finish? Let's do a rapid thing, and then we can resume you guys and catch up with them if you didn't get it answered. All right. So I also have a quick question about the simulations and whether, so you looked at innovation in terms of quantity, and I'm also wondering whether you're planning to look at it in some way in terms of quality or complexity of the innovations that result. We do have data about complexity to the extent that a longer series of elements put together, we say that's a more complex invention. We haven't published on that yet, but there are some interesting patterns, and I'd be happy to share it in the spirit of openness with you after the fact. I probably shouldn't take the time now, but I'll tell you everything I can later. All right, Daryl. I had the same question there, because could we say that one patent, one single patent is worth 100 other patents? For instance, Pfizer's Lipitor, which has been the best-selling drug for a long time, goes off patent this next month. So it looked like in your simulation, you were equating a number of patents with innovation, and is that a correct assumption? Yeah, so obviously that's not a good and final measure of innovation. It's a quick and dirty one, and that's why we used it. We have about 1,000 other measurements, including ones that combine the previous question in terms of complexity, et cetera. So I agree with you, that's an over-simplification, but rather than throw 100 graphs at you, I just threw the sort of the easiest one. But absolutely, you're right, there's more complexity to it, and the more complex data is more interesting than this, I think. All right, thank you, everybody. We're going across the way, thank you. Thank you.